Government Crisis Stalls Privatization

Reuters, 18 November 1998

PORT-AU-PRINCE, Haiti (Reuters) - For years, Haiti's national flour
mill, run into the ground by mismanagement and corruption, sat rusting
in the salt air near the shore at Laffiteau, some 10 miles north of
Port-au-Prince.

But in a week the former Minoterie (Flour Mill) d'Haiti, now shiny and
privatized, will open its doors once more, bringing homemade
flour back to the hemisphere's poorest nation for the first time since
the plant closed in 1992.

It was a difficult deal but when you see that plant shining, and
every day rusted equipment is being repaired or replaced, and you see
250 people working, that's a good sign, Serge Devieux, executive
vice president of Unibank, one of Haiti's leading commercial banks,
said.

Unibank's subsidiary, Unifinance, an investment banking services
company, and American companies Continental Grain Co. and Seaboard
Corp., bought 70 percent of the flour company for $9 million in
1997. The Haitian government owns 30 percent.

Haiti began planning the privatization of its nine state-owned
enterprises several months after the United States restored President
Jean-Bertrand Aristide to power in 1994, ending a three-year military
dictatorship.

But the flour company, renamed Les Moulins (Mills) d'Haiti, is the
only one to have gone through the process. Reasons the others have
been delayed include public resistance to selling Haitian enterprises
to foreign owners, failure to find buyers and a long government
stalemate that has left the country without anyone to sign off on
otherwise finalized deals.

GOVERNMENT STANDOFF BLOCKS NATIONAL PROGRAMS

Haiti's last prime minister resigned 17 months ago and has not been
replaced. Parliament rejected President Rene Preval's first three
nominations for the post and a fourth, Education Minister Jacques
Edouard Alexis, is said to be in trouble.

The long standoff has slowed or blocked many national programs
including privatization and held up hundreds of millions of dollars in
badly needed international aid.

An agreement to sell Haiti's cement company has been stalled for eight
months because there has been no prime minister to sign the deal, and
privatization of seven other enterprises-- the telephone company,
electric utility, seaports, airport, the two national banks and the
cooking oil factory-- also are on hold.

With privatization stalled international telecommunications companies
including at least two U.S. phone giants are in talks to make wireless
service available in Haiti without waiting for the privatization of
state telephone company Teleco, business leaders said. There are only
60,000 telephone lines in Haiti, a country whose population is
estimated at 7 million

What bothers me in the Teleco story is that Haiti could have gotten
$300 million (for the company) three years ago, before all the advance
in technology, said University of Haiti professor Kesner Pharel,
who runs a private economic consultancy.

WIDESPREAD STEALING FROM ELECTRIC UTILITY

Electricite d'Haiti has attracted little international interest, he
said. The utility

company is believed to lose 55 percent of its production to
individuals and companies who steal power from its lines.

Devieux said privatization of the state flour mill will lay the
groundwork for Haiti's plan to have a stock market. Of the $3 million
Unifinance invested, the company plans to sell $2 million in shares.

If you want to create a stock market you need stocks, Devieux
said. This will be the first widely held corporation in Haiti.

Haitian business leaders say privatization will improve the
productivity of inefficient companies and put an end to nepotism and
political favoritism in hiring.

But many public interest and political groups continue to fight
against selling state

companies, arguing that privatization will raise prices and cost more
jobs in a country where unemployment is estimated at 60 percent.

Privatizing these companies will make services unaffordable for
people in Haiti, who already have very little buying power,
Camille Chalmers, director of the Haitian Platform for Alternative
Development, said.

If cement remains in the public sector, for example, we can
regulate prices and maintain profits. If it belongs to multinationals,
the main goal will be to maximize profits, which has nothing to do
with the strategic development of infrastructure in Haiti, he
said.

Chalmers said Haiti's state companies should be given the chance to
function under a freely elected government. The military dictators who
ruled from 1991-1994 and Francois Papa Doc and his son,
Jean-Claude Baby Doc Duvalier, who ruled Haiti for 30 years
before that, were notorious for using the state companies for their
personal enrichment, he said.